At least one major player in the financial sector, Chris Berry, chairman of Mayberry Investments, is cautioning about the recently imposed suspension of dividend payments by the Bank of Jamaica (BOJ).
Last week the BOJ ordered that local financial holding companies and deposit-taking institutions suspend the distribution of dividends for the 2020 financial year. The central bank said the suspension is being done with a view to conserve capital and further enhance licensees’ lending and loss-absorption capacities.
However, Berry has concerns about the move, because while it seeks to protect liquidity in listed companies it could also scare away potential investors. Speaking at Mayberry’s Virtual Investor’s Forum last Wednesday, Berry made his concerns known.
In responding to a question from the online audience about his views on the dividend suspension, Berry remarked, “From my perspective I think it’s a bit risky because one of Jamaica’s biggest problems is attracting investors, and I think that once you start determining whether investors can get their dividend — which is why they are investing — then it’s [a] kind a double jeopardy situation.”
While acknowledging the intent of “trying to protect the national economy and the foreign exchange rate by doing that, at the same time the downside is that investors looking on are gonna say — am I gonna invest in a country where I might not be able to get my dividend”, Berry questioned.
In spite of his concerns, Berry made the point that the BOJ has a much bigger picture of the issue and therefore the central bank’s decisions are based on that bigger picture.
He concluded by declaring, “in a circumstance like this, you have to rely on them [BOJ] to make a call like that and trust that they are making the right decision”.
Mayberry’s CEO Gary Peart, who was the second panelist at the forum made reference in his presentation to the BOJ directive saying it is a move to maintain liquidity in the financial market.
Peart argued that because of this measure people will have access to capital, which is extremely important at this time.
The title of Wednesday’s investor’s forum was: The state of the financial market amidst the COVID-19 outbreak.
In announcing the suspension the BOJ said it had “come to a mutual understanding that financial holding company (FHC) designates and deposit-taking intuitions (DTIs) will suspend the distribution of profits by way of declaring dividends in any manner (cash or stock) for the 2020 financial year, until further notice”.
The central bank further said it stands ready to provide liquidity and other support necessary to ensure that financial institutions can continue to provide credit and other financial services to the public, limit the potential negative economic repercussions on the lives of ordinary Jamaicans, and preserve confidence in the Jamaican financial system.
Jamaica’s banking system has 11 players with assets valued at $1.8 trillion. They are capitalised at $192 billion, as at December 2019